Tomorrow Investor

Can ESG-driven Investments Alleviate the Issue of Water Scarcity?


The poor management of the world’s water resources has resulted in an ongoing crisis that seems to have no end in sight. At present, 28% of humanity across the globe has no access to safe drinking water, let alone related services. UNICEF and the WHO have also noted that an average of 197,000 children succumb annually to gastrointestinal diseases caused by a lack of proper sanitation and safe drinking water. 

Climate change has not helped the situation at all. Indeed, 90% of all natural disasters that have affected potable water supply are weather-related, specifically droughts and catastrophic flooding. 

In which case, international governments have initiated possible solutions to alleviate issues related to water scarcity, and private investors are helping in the effort through environment-, social-, and governance-centric (ESG) investments. 

Which industries are taking the lead?

Recent studies show that the majority of ESG investments into clean water access are mostly from those in the Technology and Communications field, with those in Transportation, Services, and Finance not too far behind.

However, in terms of individual contributions to the effort, companies within the Consumer Goods industry have taken the lead. This roster includes several prominent corporations, including consumer products giant Unilever and appliance brand Electrolux.

Who stands to have the most impact?

It isn’t surprising that Heavy Industry and Utilities – specifically power generation and distribution – are the ones that may have the most bearing when it comes to alleviating water scarcity. Both sectors have long been known as contributors to the amount of effluvium polluting water sources throughout the world. But experts have noted that these two are also the sectors with the highest capacity for generating a positive impact on water scarcity based on their business models. 

Water distribution utilities, in particular, work based on high-impact water management business models that essentially consider the potential risks as well as opportunities to be found within their corporate strategy, research and development, and daily operations. This highlights the Utilities sector’s commitment to water stewardship among the communities they service.

Asking the right questions matters

Given how access to clean water is one of the primary necessities for human existence, companies who do their part to ensure proper water management can expect to gain high social returns on investment.

In which case, corporations seeking to beef up their ESG investment portfolios need to ask themselves whether or not water is a material aspect of their business. Likewise, they should also ask if their business is part of a water-intensive sector in terms of its location (low or high water stress zoning), if their products or services lead to a substantial increase in water pollution, and whether or not it can create a product or service that will improve the efficiency of present techniques for water sourcing, treatment, and distribution.

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